Archive for June, 2008

My presentation at the Yale Governance Forum

I gave a talk on how the internet was changing shareholder engagement at the Yale Governance Forum last week. In order to demonstrate the proliferation of outstanding and cheap communication tools, I used Google Docs to create my presentation and have published it here. Check out the “speaker notes” to see my comments about each slide.

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June 18, 2008 at 2:25 pm Leave a comment

Help us fix our data

We do our best to provide accurate data, but things do go wrong. There’s so much data on our site that we can’t realistically check every vote by hand. A few weeks ago some folks from Barclays pointed out a few mistakes in their vote record, and I fixed them soon after. But we decided that the process of reporting problems should be made easier as a way of improving overall data integrity.

Today we’re introducing a new feature allowing users to report errors they find in the data. If you look at any proposal (here‘s one), meeting (here‘s one), or company (here’s one), you’ll see the words “Report a problem with this data” at the bottom of the page, which opens up a little box for you to summarize the problem and optionally leave contact information. I’m hoping people will use this feature to report problems when they arise (I know I will) so that all of us can benefit from better data.

June 17, 2008 at 1:51 pm 2 comments

Introducing our summer fellow

I’m proud to introduce Larry Crane-Moscowitz, who is working for ProxyDemocracy this summer. Larry is a rising junior at the University of Pennsylvania’s Wharton School, and he comes to us via New Sector, which pairs talented undergrads with Boston-area nonprofits for summer consulting gigs. One of the great parts about the New Sector program is the amount of support the fellows get: Larry attends biweekly training sessions and learning groups with other summer fellows, and he is getting great direction from Bain & Co consultant Dennis Huggins. I think Larry’s survey work and other research will really help ProxyDemocracy identify ways in which we can be more effective in pursuing our mission going forward. Welcome Larry, and thanks to New Sector and Bain & Co!

June 12, 2008 at 8:34 pm Leave a comment

My post at the Harvard Law School Corporate Governance Blog

Lucian Bebchuk asked me to write a guest post about ProxyDemocracy on the Harvard Law School Corporate Governance Blog. Here‘s the post; I will repost here for convenience. Thanks to Lucian and blog editor Andrew Tuch for the opportunity.

Posted by Andrew Eggers, Harvard Department of Government and ProxyDemocracy.org, on Monday June 2, 2008 at 10:20 am

It’s the height of proxy season, and with the high-profile shareholder meetings taking place at Exxon last week and Yahoo later this summer, a new website ProxyDemocracy.org offers tools to help individual investors take part in the process.

Although individuals own over 25% of US equity, institutional investors run the show when it comes to proxy voting. Driven by a mix of corporate governance zeal and fiduciary duty, mutual funds, pension funds, and other institutions invest in proxy voting research and vote their shares almost 100% of the time. By contrast, only about 20% of individual investors bother to vote; it’s safe to assume that even fewer read the proxy statement and know what they’re voting on.

Given the difficulty of researching the issues on the ballot and the ease of free riding, it’s not surprising that individual investors generally pass up their voting rights as owners. But it has a cost. Though many retail investors don’t realize it, their brokers vote on their behalf when they fail to send in a ballot. The standard approach brokers have taken is to cast all of these “uninstructed” shares for management, which tends to stack the deck against governance reform. Some brokers have recently enacted a “proportional voting” policy, which means that the votes for all of a broker’s clients are cast to reflect the votes of the minority who submitted a vote. But this only increases the importance of informed investor participation: if 20% of retail investors do the voting for the rest, it’s important that they know what they’re doing.

ProxyDemocracy.org, which I developed part-time over the past few years with help from a few other programmers, helps individual investors piggy-back on the research and judgment of respected institutional investors. We collect the intended votes of a handful of institutions (CalPERS, CBIS, Domini, and Calvert) that currently disclose their votes in advance of meetings. Users can sign up for free email alerts on our site to find out how those institutions plan to vote on stocks they own. Just as citizen voters take account of endorsements from respected groups like the Sierra Club or the NRA (depending on one’s political persuasion), individual investors can use these cues from known institutional investors to arrive at a principled vote more cheaply.

The site also provides tools for mutual fund owners. Around half of US households own mutual funds, and mutual funds own about a quarter of US equity. We have processed hundreds of SEC filings to help investors compare the voting records of leading mutual funds and determine whether their fund represents their interests at shareholder meetings. Not surprisingly, SRI funds tend to be much more activist than mainstream funds, but the differences among mainstream funds are significant as well: our fund profiles indicate that Schwab’s S&P 500 fund has a much more activist record than Vanguard’s, for example.

In the coming months, we plan to add more mutual fund profiles and collect intended votes from additional institutions. I encourage you to have a look at the site and pass along your thoughts and suggestions, either in the comments here or by email to andy [at] proxydemocracy.org.

June 4, 2008 at 11:20 am Leave a comment

The importance of broker voting policies

Financial Week published an excellent article last month about the impact of the “broker vote” on shareholder activist campaigns. Many retail investors don’t realize this, but when you fail to send in your voting instructions, your broker votes on your behalf. In the past, brokers cast these “uninstructed” votes for management, which tends to stack the deck against shareholder activists. But changes are afoot that will have an effect on voting results and, by extension, board behavior. 

One proposal that has been discussed by the NYSE is to exclude broker votes on director nominations. Broker votes are already excluded for the most part on shareholder proposals, but the rules allow them on “routine” matters. Director nominations have been classified as routine, and thus broker votes have ben included. But a proposed rule change released by the NYSE in 2006 would reclassify director nominations as non-routine, which would exclude broker votes. The change has yet to be approved by the SEC.

Meanwhile, brokers are making changes that may obviate the need for restrictions on the use of broker votes. Brokers have traditionally voted uninstructed shares on management’s side, but there was no rule requiring that they do so. A few brokers (I believe Schwab was the first) have adopted “proportional voting” instead, which means that the uninstructed shares are cast to reflect the sentiment of the instructed shares. In other words, if the Schwab clients who vote cast their shares 75%-25% in favor of a director, all Schwab clients’ shares will be voted 75%-25% in favor of that director. The FinancialWeek article tells us that three more big brokers — Merrill Lynch, Goldman Sachs and Morgan Stanley — adopted proportional voting in March of this year. According to sources in that article, the SEC may eventually require brokers to use this system.

Proportional voting greatly amplifies the voting power of individual investors who actually vote. If 20% of retail investors vote, as has been the case in recent years, your vote is worth 5 times as much under proportional voting as it would be otherwise. (This is assuming that turnout is not correlated with holdings among retail investors.) Proportional voting makes it even more important that retail investors cast an informed vote, which is where ProxyDemocracy is trying to help. 

June 3, 2008 at 4:40 pm 1 comment

“Millstein rising star of corporate governance”

I’ve been recognized as a “Millstein rising star of corporate governance” by the Millstein Center for Corporate Governance and Performance at the Yale School of Management. The announcement I received is below.

It’s really gratifying to be recognized for the hard work that’s gone into ProxyDemocracy. Credit should also go to Roop Roy, who helped immensely with website development, Mark Latham, a board member and intellectual patron saint of the project, Mark Orlowski, a board member wise beyond his years in the ways of running a small nonprofit, and Nicco Mele, board member and net evangelist. Also to Dan Giffin, Andy Felton, Becky Warren, and John Zedlewski, who helped out early on. And of course our funders, particularly Janet Shenk of the Panta Rhea Foundation, who took a chance in supporting the project and showed admirable patience. And Emily Coit who put up with a lot of late-night coding and general Sturm und Drang. And my parents. I could go on with this list, believe me.  

The award recognizes young professionals new to corporate governance, from the many bodies that comprise the global world of corporate governance, who are making an impact as outstanding analysts, experts, activists, or managers. Candidates were assessed on criteria such as past accomplishments and thought leadership; future projects and endeavors; reputation among existing industry leaders; and potential to influence the industry in the future. All honorees were nominated by a member of the governance community for their sterling work. 

The Millstein Center for Corporate Governance and Performance, in collaboration with its partners in the selection process, the Open Compliance and Ethics Group and The International Corporate Governance Network, recognizes you for your outstanding work and congratulates you on this honor.

June 1, 2008 at 4:16 pm 2 comments


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